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Exam 20: Process Costing

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Question 71

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At the beginning of the month, the Painting Department of Skye Manufacturing had 20,000 units in inventory, 70% complete as to materials, and 20% complete as to conversion. During the month the department started 115,000 units and transferred 120,000 units to the next manufacturing department. At the end of the month, the department had 15,000 units in inventory, 40% complete as to materials and 10% complete as to conversion. If Skye Manufacturing uses the weighted average method of process costing, compute the equivalent units for materials and conversion respectively for the Painting Department.

A) 126,000 materials; 121,500 conversion.
B) 121,500 materials; 126,000 conversion.
C) 112,000 materials; 117,500 conversion.
D) 126,000 materials; 117,500 conversion.
E) 112,000 materials; 121,500 conversion.

F) A) and D)
G) C) and E)

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Question 72

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Conversion cost per equivalent unit is the combined cost of direct materials, direct labor, and factory overhead per equivalent unit.

A) True
B) False

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Question 73

Multiple Choice

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In a process costing system, when manufacturing overhead costs are applied to the cost of production, they are debited to:

Prepare journal entries to record the following production activities for Oaks Manufacturing. a. Incurred overhead costs of $79,000 (paid in cash). b. Applied overhead at 110% of direct labor costs which are $93,900. c. Transferred completed products with a cost of $258,200 to finished goods inventory. d. Sold $602,000 of product on credit. Cost is $271,000.

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations and sales activities for June. The journal entry to record June sales is: $\begin{array} { | l | r | } \hline \text { Direct materials used } & \$ 87,000 \\\hline \text { Direct labor used } & 160,000 \\\hline \text { Predetermined overhead rate (based on direct labor) } & 155 \% \\\hline \text { Goods transferred to finished goods } & 432,000 \\\hline \text { Cost of goods sold } & 444,000 \\\hline \text { Credit sales } & 810,000 \\\hline\end{array}$

Which of the following characteristics does not usually apply to process operations systems?

A process cost summary is an accounting report that describes the costs charged to each department, the equivalent units of production by each department, and determining the costs assigned to each department's output.

Prepare journal entries to record the following production activities for Oaks Manufacturing. a. Used $93,900 of direct labor in the production department. b. Used $11,200 of indirect labor.

Why is the Process Cost Summary important to management and how does the Process Cost Summary accomplish its purposes?

A company uses a process costing system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year: Ending Work in Process $\quad$ $\quad$ 5,300 units, $50 \%$ complete Units completed and transferred to finished goods 28,700 units Direct labor costs during the year $\quad$ $\quad$$\$ 199,300$ Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Which of the following products is most likely to be produced in a process operations system?

A company uses a process costing system. Its Welding Department completed and transferred out 100,000 units during the current period. The ending inventory in the Welding Department consists of 30,000 units (75% complete with respect to direct materials and 40% complete with respect to conversion costs) . Determine the equivalent units of production for the Welding Department for direct materials and conversion costs assuming the weighted average method.

Following is a partial process cost summary for Mitchell Manufacturing's Canning Department. - The total conversion costs transferred out of the Canning Department equals:

In a process costing system costs are measured upon completion of each job.

Describe the flow of materials in a process costing system, including accounts used.

If Department R uses $60,000 of direct materials and Department S uses $15,000 of direct materials, the following journal entry would be recorded by the process costing system: $\begin{array}{l}\text { Work in Process Inventory, Department R } & 60,000 \\\text { Work in Process Inventory, Department S } & 15,000\\\text { Raw Materials Inventory }&&75,000\end{array}$

Describe the flow of labor in a process costing system, including accounts used.

If the predetermined overhead allocation rate is 250% of direct labor cost and the Finishing Department's direct labor cost for the reporting period is $20,000, the following entry would record the allocation of overhead to the products processed in this department: $\begin{array}{llr} \text {Work in Process Inventory, Finishing Dept. } &50,000\\ \text { Factory Overhead } &&50,000\\\end{array}$

If the indirect labor cost in August for clerical and maintenance that help production in all departments was $123,000, the following journal entry would be recorded in a process costing system: $\begin{array}{llr} \text { Factory Overhead } &123,000\\ \text {Factory Wages Payable } &&123,000\\\end{array}$

In some circumstances, a process costing system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.